Important:
- To claim the R&D tax credit, you must submit a detailed statement online.
- In most instances, the last date for submitting a detailed statement was April 30 2010. Find out more
Market research, testing and development
Excluded activities
Activities excluded from being systematic, investigative and experimental (SIE) activities are:
- market research
- market testing
- market development
- sales promotion.
Consumer surveys are also an excluded activity.
All these activities are ineligible as SIE activities.
Researching new techniques in market research or advertising is also excluded as an SIE activity if the uncertainties being investigated relate to the social sciences.
Example - market research
Company D is considering taking a product line into a new market. Market research to see if there is a niche that could be exploited is excluded as SIE activity.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
Can these activities be support activities?
The development cycle for a product or service often includes research to identify a market niche and the characteristics a product or service would need to be commercially viable.
Further market research, testing or promotion may take place to influence other decisions such as pricing, styling or marketing.
Because they support commercial rather than technological objectives, many of these activities will not meet the criteria for eligible support activities. These must be all of the following:
- wholly or mainly for the purpose of the SIE activities
- required for the SIE activities
- integral to the SIE activities.
Consumer testing as support activity
If consumer testing is necessary to check whether technological objectives have been achieved, it may be eligible as a support activity.
This may happen in the food industry where the technological objectives in an SIE process can include sensory properties. Where consumer testing (organoleptic testing) is necessary to test the sensory properties of a product, such testing is directed at specific objectives and involves trained panels.
Example - sensory testing as a support activity
Company A wants to produce a new fruit dessert with a "mouth feel" and sweetness that appeals to the Asian market, while retaining the product’s other characteristics such as shelf-life and stability.
The company's food technologists have surveyed the industry and established that this information is not available. Resolving this problem requires an SIE process that meets the definition for eligible R&D.
Sensory testing to achieve the desired "mouth feel" and sweetness characteristics, using a research methodology and trained panels, is included as a support activity.
Note: Examples are simplified. You should check the detailed R&D information and/or consult your professional advisor.
New Zealand legislation
Income Tax Act 2007
- schedule 21 part C, clause 3
- LH 7(1)(b)
- LH 7(2)(b)
Date published: 26 Mar 2008
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